Market comment 2023

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His main concern is a repeat of what was seen in February 2018, when a spike in volatility crushed short volatility strategies, dubbed “Volmaggedon.” By some estimates it wiped out $2 billion in investor assets. “While history doesn’t repeat, it often rhymes, and current selling of 0DTE (zero day to expiry), daily and weekly options is having a similar impact on markets,” said Kolanovic. “If there is a big move when these options get in the money, and sellers cannot support these positions, forced covering would result in very large directional flows. These flows could particularly impact markets given the current low liquidity environment,” he added. As he explained, these are typically “low delta options that rarely get in the money and their impact is mostly through volatility suppression and an intraday buy-the-dip pattern that results from hedging,” Kolanovic says. Delta is a metric that measures how much the price of a derivative would change, given a $1 shift in its underlying security.

Another 'Volmageddon'? JPMorgan becomes the latest to warn about an increasingly popular short-term options strategy.

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What happened to that recession? The recession we were supposed to be in right now, I mean—the one that various forecasters assured us was a sure thing. The “writing is on the wall,” many economists believed in June. A downturn was “effectively certain” as of October. Maybe the dip was already here, some suspected, and we just had yet to notice it.

Or not. Unemployment is holding steady at its lowest rate in half a century. Layoffs are not increasing. The economy is growing at a decent clip. Wages are rising, and households are not reducing their spending. Corporate profits are near an all-time high. Consumers report feeling confident. So why were forecasters so certain about a recession last year, leading so many people to feel so pessimistic?

The Economist retains a database of annual GDP forecasts, now numbering more than 100,000. It has found that analysts tend to be off by 0.4 percentage points a quarter in advance, 0.8 percentage points a year in advance, and 1.3 percentage points two years in advance. (Those variations are significant, given that wealthy countries tend to have growth rates between zero and 4 percent.) The publication has also found that forecasters are the least accurate right before a recession hits. In other words, recessions are the hardest thing for analysts to forecast.

The Reason the Recession Hasn’t Happened Yet

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“Investors are broadly assuming that regulators are going to step in and ringfence the sector if need be, and that’s what keeps it from spilling over to the broader market,” said Anastasia Amoroso, chief investment strategist at iCapital, in a phone interview. There’s also a second reason. Investors see the banking woes forcing the Fed to pause the rate-hike cycle or even begin cutting as early as June, she noted. An end to the yearlong rise in rates will remove a source of pressure on stock-market valuations.

Why the worst banking mess since 2008 isn't freaking out stock-market investors --- yet

But with higher borrowing costs, weaker levels of economic growth, and fewer people working in offices in town and city centres after the pandemic, investors fear a perfect storm is brewing in the property sector. After the collapse of Silicon Valley Bank, the largest banking failure since 2008, and the UBS rescue of Credit Suisse, some City investors are worried the next phase of the crisis could pile pressure on the commercial property market– worth $20tn (£16tn) globally – if banks rein in their lending to the industry.

Could office blocks be the next big casualty of the banking crisis? | Business | The Guardian

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The bigger wrecking ball may be in commercial real estate. It was this type of lending, not domestic mortgages, that sank Lehman Brothers in the US, and HBOS and Royal Bank of Scotland Group in the UK, during the banking crisis of 2008-10. Those near-death experiences have made the banking sector doubly cautious ever since, such that exposure to commercial property is today little more than 6pc of all bank lending in the UK, against double that at the time of the Global Financial Crisis. 

Unfortunately, the situation looks potentially rather more serious in the US, where lending to the commercial real estate sector is dominated by the country’s already vulnerable small and mid-tier banks. Lending to commercial property accounts for about 40pc of all loans by smaller US banks (defined by the Fed as being those outside the 25 largest by asset size), says Capital Economics' chief US economist, Paul Ashworth. “These banks account for about 70pc of outstanding loans to the commercial real estate sector.” They are also the very same banks that are experiencing significant outflows of deposits to higher yielding money market funds. 

Financing of US commercial real estate is likely to tighten accordingly. Up goes the cry, ‘but this time is different’. And yes it is, at least in the UK, where banks are sufficiently well capitalised to withstand a high degree of debt forbearance when loan covenants are breached by falling property prices. Whether the same is true of the US remains to be seen. Whatever the answer, it's not going to be good for wider credit provision in either the US or Europe. If there are unrecognised losses on the balance sheet, banks will be even less keen to lend. In the US, if not so much in the UK, there is a real danger of a negative feedback loop, where worries about commercial property exposure among smaller banks leads to further deposit withdrawals and balance sheet contraction, which in turn further undermines real estate prices. But let's not panic.

Don’t panic, but a wrecking ball risks hitting the world’s biggest economy

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On March 9, depositors scrambled to pull out more than the $40 billion from SVB as panic spread throughout Twitter, along with other social media platforms like Slack and WhatsApp, after the bank revealed a $1.8 billion loss within its bond portfolio and plans to raise more than $2 billion in new capital. "In response, social media saw a surge in talk about a run, and uninsured depositors acted quickly to flee," Barr said. "On Thursday evening and Friday morning, the bank communicated that they expected even greater outflows that day," Barr added. 

"The bank did not have enough cash or collateral to meet those extraordinary and rapid outflows, and on Friday, March 10, SVB failed. "Panic prevailed among SVB's remaining depositors, who saw their savings at risk and their businesses in danger of missing payroll because of the bank's failure." Speaking in an interview at the Economic Club of Washington last week, Citigroup CEO Jane Fraser said social media and mobile banking was a "complete game changer" in SVB's demise.


"It's a complete game changer from what we've seen before," she said. "There were a couple of tweets and then this thing went down much faster than has happened in history. And frankly I think the regulators did a good job in responding very quickly because normally you have longer to respond to this."

 Regulators blame social media for SVB's rapid collapse: 'Complete game changer'

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These banks will be tapping funds at roughly 4.5% or possibly higher due to the Fed’s recent rate hike, whereas the yield on their held maturity securities varies with institutions, she said. Wood noted that the now-defunct Silicon Valley Bank’s yield was 1.6% and Charles Schwab Corp.’s was likely around 1.7%. The net interest margins of banks will turn into net interest losses, which will feed into earnings and so there will be a slow bleed, she said. The fund manager also noted that the M2 money supply turned flat and then negative in January and February. “I don't see why it is going to turn around, especially with the Fed continuing to move interest rates up. So I do believe that there has been a very big mistake,” Wood said. She underlined the fact there were warnings such as the credit default swap bumps since January 2022 and the inversion in the yield curve that started with it.

'Very Big Mistake': Cathie Wood Warns Banking Crisis Could Bleed Into Earnings - Charles Schwab (NYSE:SCHW), SPDR S&P Regional Banking ETF (ARCA:KRE) - Benzinga

However, much like the lag consistent with Fed rate hikes -- economists say rate rises aren't truly felt until around 18 months after they are put in place -- the effect of tighter lending standards, fewer new-loan offerings and the follow-on into business investment and consumer spending may not be evident for some time. "Whether the likely tightening in credit over the next few months is enough to tip the overall economy into a recession is unclear, but the room for error against our pre-SVB growth forecasts is depressingly small," said Ian Shepherdson of Pantheon Macroeconomics.

Bank Crisis Credit Crunch Will Clip S&P 500 Earnings, Slam Stocks - TheStreet

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Have you ever dreamed of becoming a landlord but didn't know where to begin? A startup with the backing of Amazon Founder Jeff Bezos, called Arrived Homes, could be the answer to your prayers. With only $100, you can use this innovative platform to transform yourself into a property owner today. Click here and become a real estate owner with as little as $100. With a straightforward business model that has already attracted over 243,000 investors, Arrived Homes has become a popular investment opportunity.

Jeff Bezos Is Making It Easier Than Ever To Become A Landlord With Just $100 - Benzinga

Artificial intelligence (AI) could replace the equivalent of 300 million full-time jobs, a report by investment bank Goldman Sachs says. It could replace a quarter of work tasks in the US and Europe but may also mean new jobs and a productivity boom. And it could eventually increase the total annual value of goods and services produced globally by 7%. Generative AI, able to create content indistinguishable from human work, is "a major advancement", the report says.

AI could replace equivalent of 300 million jobs

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The recent boost to Nasdaq valuations from declines in interest rates was certainly a welcomed change, but tech stocks do need to support their prices with fundamentals, which have “deteriorated meaningfully” from last year, said market analysts. “It’s a mistake for people to view tech as a safe haven in this environment,” Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, told MarketWatch via phone. He said the fundamentals of tech firms are deteriorating as demand starts to soften during a potential economic slowdown.  “That’s why tech companies are laying people off aggressively. They can get away with less employees now that demand is less, but they have to realize their revenues aren’t growing. They gotta cut their expenses.”

Tech stocks back as a haven? 'It's a mistake,' say market analysts

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Simple S&P 500 Dip-Buying In 2023 Would Have Beaten The Average Hedge Fund: A dip-buying strategy on the S&P 500 would have returned 8% in the first quarter of 2023, considering that there have been 28 red days and 0.3% return in the session that followed each one. That’s substantially more than the average return provided by hedge funds this year. The Global X Guru Index ETF (NYSE:GURU), an exchange-traded fund investing in the highest conviction ideas from a select pool of hedge funds, is up by just 1%.

A Plain And Simple Dip-Buying Strategy On The S&P 500 Would Have Beaten Many Hedge Funds In 2023

Tech stocks are poised for a strong year, with growth names looking particularly attractive, according to Marc Chaikin, founder and CEO of . What Happened: Joining Benzinga’s PreMarket Prep on Thursday with hosts Dennis Dick, Joel Elconin and Mitch Hoch, Chaikin highlighted several companies with bullish power gauge ratings, including the following. Airbnb Inc (NASDAQ:ABNB) DocuSign Inc (NASDAQOCU) Pinterest Inc (NYSEINS) Roku Inc (NASDAQ:ROKU)

'Go Off The Beaten Track,' Market Guru Says: Buy Growth Names

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It is one of China’s most popular shopping apps, selling clothing, groceries and just about everything else under the sun to more than 750 million users a month. But according to cybersecurity researchers, it can also bypass users’ cell phone security to monitor activities on other apps, check notifications, read private messages and change settings. And once installed, it’s tough to remove. While many apps collect vast troves of user data, sometimes without explicit consent, experts say e-commerce giant Pinduoduo has taken violations of privacy and data security to the next level. 

In a detailed investigation, CNN spoke to half a dozen cybersecurity teams from Asia, Europe and the United States — as well as multiple former and current Pinduoduo employees — after receiving a tipoff. Multiple experts identified the presence of malware on the Pinduoduo app that exploited vulnerabilities in Android operating systems. Company insiders said the exploits were utilized to spy on users and competitors, allegedly to boost sales. “We haven’t seen a mainstream app like this trying to escalate their privileges to gain access to things that they’re not supposed to gain access to,” said Mikko Hyppönen, chief research officer at WithSecure, a Finnish cybersecurity firm. “This is highly unusual, and it is pretty damning for Pinduoduo.”

‘I’ve never seen anything like this:’ One of China’s most popular apps has the ability to spy on its users, say experts